Internship report on credit management policy & procedure by mutual trust bank on alankar branch
1. CREDIT MANAGEMENT POLICY AND PROCEDURE
- A Study on Mutual Trust Bank, Alankar Mour Branch, Chittagong.
(This Report has been submitted as the partial fulfillment of Requirements for the
Degree of Bachelor of Business Administration major in Finance & Banking)
PREPARED BY
Md. Abdullah Al Noman
ID: B131370
Program: BBA
Semester: AUTUMN 2016
Major: Finance & Banking
Internship Duration: 17th April - 22th June
Date of Submission: 15th July, 2017
DEPARTMENT OF BUSINESS ADMINISTRATION
Faculty of Business Studies
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
2. CREDIT MANAGEMENT POLICY AND PROCEDURE
- A Study on Mutual Trust Bank, Alankar Mour Branch, Chittagong.
(This Report has been submitted as the partial fulfillment of Requirements for the
Degree of Bachelor of Business Administration major in Finance & Banking)
PREPARED BY
Md. Abdullah Al Noman
ID: B131370
Program: BBA
Semester: AUTUMN 2016
Major: Finance & Banking
SUPERVISOR
Md. Kazi Golam Azam
Assistant Professor
DEPARTMENT OF BUSINESS ADMINISTRATION
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
Internship Duration: 17th April - 22th June
Date of Submission: 15th July, 2017
Signature of Supervisor
DEPARTMENT OF BUSINESS ADMINISTRATION
Faculty of Business Studies
INTERNATIONAL ISLAMIC UNIVERSITY CHITTAGONG
3. Letter of Submission
Date: 15 July 2017
The Convener,
Internship & Dissertation Committee
International Islamic University Chittagong
Subject: Submission of Internship Report
Dear Sir,
Here is the report on “Credit Management of Mutual Trust Bank Alankar Mour Branch” you asked
me to conduct on the beginning of the Internship.
In this assignment, I have tried to focus some key aspects of credit management of Bank Services.
Here I show how here I use different tools of credit management of Mutual Trust Bank.
I appreciate having this assignment. I prepared this assignment with sincerity and serious effort.
Thank you for providing me the opportunity to prepare this. I am really grateful to you for giving
me the scope to prepare this report under your observation. I have enjoyed preparing this report
and presented it for your judgment.
Sincerely yours,
Md. Abdullah Al Noman
Matric no. –B13170
BBA (Major in Finance & Banking)
Department of Business Administration
International Islamic University Chittagong
4. ACKNOWLEDEMENT
At first I would like to express my gratitude to the Almighty Allah who has given me the
opportunity to go through the whole process of Internship and write a report on this regard
successfully. Basically, this report is about “A study on Credit Management Policy &
Procedure on Mutual Trust Bank AlankarMour Branch.
I would like to acknowledge my heartiest gratitude to the Honorable Faculty Md.
KaziGolamAzam, Assistant Professor, Department of Business Administration, International
Islamic University Chittagong, who has given me the full support and suggestions for preparing
the report successfully and which became an excellent way of understanding the topic of my
Internship.
I am grateful to all the individuals of on Mutual Trust Bank AlankarMour Branch who helped me
with full support and cooperation during my Internship period. I would like to express my thanks
to M. Iqramul Bashar (JAVP), Md. Minhaj Karim Romal (JO), SK Md. ArfanUllah (JO)
and all employees of on Mutual Trust Bank AlankarMour Branch, who have helped me by
contributing their time and providing me with information related to the topic. I appreciate their
consideration.
5. Executive Summary
Internship program is the pre-requisite for the graduation in BBA. Classroom discussion alone
cannot make a student perfect in handling the real business situation; therefore, it is an opportunity
for the students to know about the real life situation through this program. A report has to be built
for the university and organization requirement. The topic of my report is “Credit Management
of Mutual Trust Bank, Alankar Mour Branch”. The main purpose of the report becomes very
clear from the topic of the report.
This is an orientation report that contains the real life day to day working experience of different
tasks in Credit Department of Mutual Trust Bank Limited, Alankar Mour Branch. Mutual Trust
Bank Ltd, (MTB) is a pioneer and leading private bank in Bangladesh. To serve the nation
Mutual Trust bank performs some activities for their clients like: general banking, loan and
advance, capital market operation etc. Bank collects deposit from public and provides it’s to other
business or individual as loan. Bank pays interest to deposit holder and take interest from
borrowers. Mutual Trust bank measure all risk components before sanctioning a loan. When all
the formalities completed then respective officer disburse the loan. After disburse the loan it is
duty of bank to recover the disbursed loan. This report is based on actual information and working
procedure practiced in MTB. The overall credit management of MTB has analyzed to give a clean
idea about the policy of MTB and implementation of that policy by various mechanism and
process. The objective of this study is to analyze the credit policy, rules and regulation of credit
management and evaluation of the product performance in order to identify the major problems
regarding the credit management.
The first section of this report consists of an introductory part of this report, which has been
developed for the proper execution of the entire report. In the second part, overview of banking
industry in Bangladesh. This chapter encloses overview of the banking industry. In the third part
of this report a brief description about the host organization of my internship, Mutual Trust Bank
has been given. In part four consists of some information about credit, its usefulness and credit
management policy and procedure of Mutual Trust Bank. The five parts the overall credit
management performance of Mutual Trust bank Alankar Mour branch and every contents is
analyzed with chart and graphical presentation. The remaining part consist the findings,
recommendations and conclusion.
To prepare this report both primary and secondary sources of data have been used. Mutual Trust
Bank credit policy is quite lengthy. Disbursement of loan and advances are increasing year by
year. On the basis of findings it can be recommended for betterment that their loan sanctioning
procedure should be less time consuming and monitoring should be stricter.
6. From my part, I would like to suggest, Mutual Trust Bank Alankar Mour Branch should strictly
follow the principles of sound lending and they should make strong their credit monitoring
department. Among the most important of these are honesty, reliability, thoroughness and
willingness to always be open to new ideas and new ways of meeting customer needs.
7. Table of Contents
SL. No Title Page No
1.0 CHAPTER ONE
INTRODUCTION
01-04
1.1.Introduction 01
1.2.Background of Topic 02
1.3.Objectives of the Study 02
1.4.Scope of the Study 03
1.5.Methodology of the Study 03
1.6.Limitations of the Study 04
2.0 CHAPTER TWO
Overview of Banking Industries in Bangladesh
05-10
2.1. As Regards of Banking Industries in Bangladesh 05
2.2. Banking History in Bangladesh 05
2.3 Classification of Schedule Banks in Bangladesh 06
2.4. Functions of Commercial Banks in Bangladesh 10
2.5. Contribution of Commercial Banks in Bangladesh 10
2.6. Islamic Banking 11
2.7. Possibilities of Banking Industries in Bangladesh 11
3.0 CHAPTER THREE
MTB at a Glance
12-22
3.1. Background Profile of MTB 12
3.2. Mutual Trust Bank at a Glance 14
3.3. Strategic Objectives 15
3.4. MTB Mission 15
3.5. MTB Vision 15
3.6. MTB Slogan 15
3.7. Functions of MTB 16
3.9. Hierarchy of Organization 17
3.10. Product Profile 18
3.11. Service Profile 20
3.12. Company’s Competitive Status 20
3.13. Last Four Year Position MTB 21
3.14. Branch Overview 22
CHAPTER FOUR 23-45
8. Credit Management Policy and Procedure
4.1. Credit Management 23
4.2. Factors Considered for Credit 24
4.3. Significance of Credit 24
4.4. Importance of Bank Credit 25
4.5. Credit Policy of MTB 25
4.6. Types of Credit Provided by MTB 25
4.7. Different Securities for Different Types of Advances 30
4.8. Methods of Charging Securities 32
4.9. The 9C’s of Bad and Good Loan in Credit Management 34
4.10. Different Categories of Risks Associated with CM 35
4.11. Credit Risk Grading System 37
4.12. General Procedure of Sanctioning Loan 39
4.13. Status of Loans 45
5.0 CHAPTER FIVE
Data Analysis
46-43
5.1. Introduction 46
5.2. Loan and Advance 46
5.3. Collection of Loan and Advance 47
5.4. Credit to Deposit Ratio 48
5.5. Classified Loan 49
5.6. Net Profit 50
5.7. Growth of Profit 51
6.0. CHAPTER SIX
Findings, Recommendations & Conclusion
52-55
6.1. Summary of Findings 52
6.2. Recommendations 53
6.3. Conclusion 54
References 55
10. 1.1. Introduction
Banks are the key financial that play a vital role in the country’s economy. It deals with accepting
deposit from the public and advances as well as various loans for public. During the last decade,
banking became the most competitive industries of Bangladesh with a huge amount of growth.
Globalization in the banking section has through up opportunities as well as challenges.
Competition is getting edge day by day. It paces with continuous development occurring in the
tremendous competitive environment. Banks offer a widest menu of services of any financial
institution. Banks are among the most important financial institution in the economy. They are
the principal source of credit and they take deposit from people.
This report on “Credit Management of Mutual Trust Bank”- A study on Mutual Trust Bank,
Alankar Mour Branch is a collaborated representation of the internship program at Mutual Trust
Bank, which is a partial requirement of the Bachelor of Business Administration (BBA) Program
of International Islamic University Chittagong. The Purpose of the report is to contemplate the
knowledge and experience accumulated from the internship program. Modern banks play an
important part in promoting economic development of a country. Banks provide necessary funds
for executing various programs underway in the process of economic development. They collect
savings of large masses of people scattered throughout the country, which in the absence of banks
would have remained idle and unproductive. These scattered amounts are collected, pooled
together and made available to commerce and industry for meeting the requirements. Economy
of Bangladesh is in the group of world’s most undeveloped economies. One of the reasons may
be its undeveloped banking system. Government as well as different international organizations
have also identified that undeveloped banking system causes some obstacles to the process of
economic development. So they have highly recommended for reforming financial sector.
In any country strong banking sector indicate strong economic condition of the country. Mutual
Trust Bank Limited is the preferred choice in banking for friendly and personalized services,
cutting edge technology, tailored solutions for business needs, global reach in trade and commerce
and high yield on investment, assuring excellence in banking services.
11. 1.2. Background of Topic
Credit is the central function, as it is known as the heart of financial intuitions like Banks. Because
through effective and efficient credit practice, overall risk of the intuitions can be alleviated. As
so each banking institutions follows the policies and rules CRM provided by Bangladesh Bank
introduced new accounting policies with respect to loan classification provisioning and interest
suspense in 1989 with a view to attaining international standards over a period of time. As a result,
all the financial and non-financial institutions are involved in credit practice and concentrating
more to provide better service with maintaining a better credit policy to uphold its own financial
growth.
As a part of Internship Program of Bachelors of Business Administration at International Islamic
University Chittagong, IIUC, I was assigned for doing my internship in Mutual Trust Bank,
Alankar Mour Branch. My program started from April17, 2017 to June23, 2017 selected by the
Career Service Office of the IIUC. In Mutual Trust Bank, I was assigned with Credit Department
where my organizational supervisor was Md. Minhaj Karim Romal. My project was on "Credit
Management Policy at Mutual Trust Bank". This was given by my faculty supervisor Md. Kazi
Golam Azam Assistant Professor of International Islamic University Chittagong, and the project
was approved by my organizational supervisor.
1.3. Objective of the study:
This report emphasizes the importance of loan & Advance of banking in the context of Credit
Risk Management of the commercial banks in Bangladesh along with the conditions of The Mutual
Trust Bank. A huge work has been performed for preparing this report. The objectives behind
this research paper are pointed below:
To highlight overview of banking industries in Bangladesh.
To know about the Mutual Trust Bank at a glance.
To know about the depth knowledge of credit management’s policy and procedures.
To evaluate the credit management performance of Mutual Trust Bank, Alankar Mour Branch.
To identify Findings and providing recommendations regarding credit management.
12. 1.4. Scope of the Study
I have worked as an internee in the Mutual Trust bank on Alankar Mour branch, which is one of
the most successful banks in the country. The scope of this study is credit management of MTB.
This study makes an attempt to cover within its scope almost all the significant aspects of credit
operations of the selected banks. The study is organized as follows:
Account opening
Clearing
FDR
Deposit
Loan and Advance
Credit profile of the selected banks
Loan recovery
1.5. Methodology of the Study
This is a description research work. Data was thereby collected from primary & secondary
sources, they are:
1.5.1. Primary Sources:
• Face to face conversation with the respective officer.
• Face to face conversation with the clients of the Bank.
1.5.2. Secondary Sources:
Official website of Mutual Trust Bank
Credit Policy Manual of the Banks
Prudential Guidelines on Credit Risk Management issued by Bangladesh Bank.
Annual report of MTB.
Annual report of Bangladesh Bank
13. News papers and journals from websites.
Circulars, letters and memos issued by the Banks and regulatory organization i.e.
Bangladesh Bank and Govt.
Websites of MTB
1.6. Limitation of the Study
All data aren’t ready to support us all the time and the internee student face lots of problem for
collecting data from the branch. Now-a-days the private banks are very busy and lucrative to
survive. Within short time the students can’t understand all the sector of the banks. There were
some encountered problems that obstructed me in the accomplishment of the study. Limitations
of the study are given bellow:
Scarcity of sufficient written documents.
All the employees are very busy. So that I couldn’t get greater help from them.
There are various sectors but internee student can’t enter there on account of security.
Sometimes the internee students forced to work the uncreated works where we get nothing
to learn. Sometimes I was assigned to do some jobs without explaining why this work is
to be done.
I got heavy pressure there.
Only 9 weeks are not sufficient to visit all the desks in the branch. So some desks were
remained unvisited.
There is no specified accommodation for me.
15. 2.1. As Regards of Banking Industries in Bangladesh
Banking industry of Bangladesh is one of the major industries, which contributes significantly to
the national economy. This comprises a number of banks in various categories. Considering
ownership the industries can be classified in to four major categories- such as Nationalized
Commercial Banks (NCBs), Specialized Banks (SPBs), Private Commercial Banks (PCBs)
and Trans-National Banks (TNBs).
The commercial banking system put on vital role in Bangladesh's financial sector. Bangladesh
Bank is the Central Bank of Bangladesh and the principal regulator of the sector. Bangladesh
have total of 59 states owned, private, foreign and specialize Banks. The banking system consists
of 6 state-owned commercial banks, 34 private commercial banks, 9 specialized development
banks, and 10 foreign commercial banks. The Nobel Prize for Grameen Bank is a specialized
micro-finance institution, the concept of Micro credit revolution and a major contribution to
poverty alleviation and empowerment of women in Bangladesh.
2.2. Banking History in Bangladesh
Banking in Bangladesh is as old as banking in other parts of the world. Today’s banking system
has evolved primarily from British banking through it was undergone substantial changes in post
liberation period.After the emergence of Bangladesh in 1971 Bangladesh Bank was established in
1972 which is the successor bank of State Bank of Pakistan. It is wholly Government owned bank
managed by a board appointed by the government.
Again after the achievement of victory against par occupation forces 16th
December 1971, there
were 12 schedule banks operating in Bangladesh. All these banks were established by Pakistanis
and their head offices were in West Pakistan.The Bangladesh government regarding initially
nationalized the entire domestic banking system and proceeded to recognize and rename the
various banks. Foreign owned banks were permitted to continue doing business in Bangladesh..
Now, banking sector in
Bangladesh is primarily of two types:
16. A) Scheduled Bank
B) Non-scheduled Bank
A) Scheduled Bank: The banks which get license to operate under Bank Company Act, 1991
(Amended in 2003) are termed as Scheduled Bank. State-owned commercial banks, private
commercial banks, Islamic commercial banks, foreign commercial banks and some specialized
banks are Scheduled Bank.
B) Non-Scheduled Bank: The banks which are established for special and definite objective and
operate under the acts that are enacted for meeting up those objectives are termed as Non-
Scheduled Bank. These banks cannot perform all functions as like as scheduled banks.
Grameen Bank, Probashi Kallyan Bank, Karmasangsthan Bank, Answer VDP Unnayan Bank
are Non-Scheduled Bank.
2.3. Classification of Schedule Banks in Bangladesh
A. Central Bank
Bangladesh Bank
B. State Owned Commercial Banks (SOCBs):
There are 5 SOCBs which are fully or majorly owned by the Government of Bangladesh.
1. Sonali Bank Limited
2. Janata Bank Limited
3. Agrani Bank Limited
4. Rupali Bank Limited
5. Bangladesh Krishi Bank Limited
Under State Owned Commercial Banks (SOCBs) there are four specialized banks are now
operating which were established for specific objectives such as social development, like
agricultural or industrial development. These banks are also fully or majorly owned by the
Government of Bangladesh.
17. Four specialized banks are as follows
1. BASIC Bank Limited
2. BDBL (Bangladesh Development Bank Limited)
3. Rajsahi Krishi Unnoyon Bank (RKUB)
4. Bangladesh Krishi Bank Limited
C. Private Commercial Banks (PCBs):
There are 39 private commercial banks which are majorly owned by the private entities where
among them 32 PCBs perform their banking functions in conventional fashion i.e interest
based operations and rest 8 banks operate under Islami Shariah i.e. Profit-Loss Sharing
(PLS) mode.
1. AB Bank Limited
2. Bangladesh Commerce Bank Limited
3. Bank Asia Limited
4. BRAC Bank Limited
5. Dhaka Bank Limited
6. Dutch Bangla Bank Limited
7. Eastern Bank Limited
8. IFIC Bank Limited
9. Jamuna Bank Limited
10. Meghna Bank Limited
11. Mercantile Bank Limited
12. Midland Bank Limited
13. Modhumoti Bank Limited
14. Mutual Trust Bank Limited
18. 15. National Bank Limited
16. NCC Bank Limited
17. NRB Bank Limited
18. NRB Commercial Bank Limited
19. NRB Global Bank Limited
20. One Bank Limited
21. Prime Bank Limited
22. Pubali Bank Limited
23. South Bangla Agriculture and Commerce Bank Limited
24. Southeast Bank Limited
25. Standard Bank Limited
26. The City Bank Limited
27. The Farmers Bank Limited
28. The Premier Bank Limited
29. Trust Bank Limited
30. United Commercial Bank Limited
31. Uttara Bank Limited
32. Simanta Bank Limited
There are eight private Islamic Commercial Banks in Bangladesh:
1. Islami Bank Bangladesh Limited
2. Al-Arafah Islami Bank Limited
3. Export Import Bank of Bangladesh Limited
4. Social Islami Bank Limited
5. Shahjalal islami Bank Limited
6. First Security Islami Bank Limited
7. Union Bank Limited
8. ICB Islamic Bank Limited
19. D. Foreign Commercial Banks (FCBs):
10 FCBs are operating in Bangladesh as the branches of the banks which are incorporated in
abroad.
1. Bank Al-Falah
2. Citibank NA
3. Commercial Bank of Ceylon
4. Habib Bank Limited
5. HSBC (The Hong Kong and Shanghai Banking Corporation Ltd.)
6. National Bank of Pakistan
7. Standard Chartered Bank
8. State Bank of India
9. Woori Bank
10. ICICI Bank
E) Specialized Development Banks:
1. Bangladeshi Krishi Bank
2. Rajshahi Krishi Unnayan Bank
3. Rajshahi Krishi Unnayan Bank
4. Progoti Co-operative Land Mortgage Bank Limited
5. Grameen Bank
6. The Dhaka Mercantile Co-operative Bank Limited (DMCBL)
7. Bangladesh Somobay Bank Limited (Cooperative Bank)
8. Ansar VDP Unnyan Bank
9. Karmasangstan Bankangladesh Development Bank Limited
20. 2.4 Function of Commercial Banks in Bangladesh
2.5 Contribution of Commercial Bank in Bangladesh
1. 1.Banks promote capital formation
2. 2.Investment in new enterprises
3. 3.Promotion of trade and industry
4. 4.Development of agriculture
5. 5.Balance development of different savings
6. 6.Influencing the economy activity
7. 7.Implementation of monetary policy
8. 8.Export promotion cells
Figure: Functions of Commercial Banks in Bangladesh
21. 9. 2.6 Islamic Banking
Alongside the conventional interest bearing banking system, Bangladesh entered into an Islamic
Banking system (profit-loss sharing) in 1983. At present, out of 59 banks in Bangladesh, 3
private commercial banks are operating as full-fledged Islamic banks and 10 conventional banks
are partially involved in Islamic banking in a total of 35 branches. The Islamic banking industry
continued to show strong growth since its inception in 1983 to June 2014 in tandem with the
growth in the economy, as reflected by the increased market share of the Islamic banking industry
in terms of assets, financing and deposits of the total banking system.
2.7 Possibilities of the Banking Industries of Bangladesh
There are huge possibilities of the banking sector in Bangladesh. These are below:
1. Banking sector of Bangladesh has a great opportunity to become a major sector of the
national economy.
2. Bangladesh has huge number of population. This advantage may accelerate expansion and
growth of Bangladeshi banking sector.
3. Bangladeshi banking sector is very much capable to ensure proper quality of the product
services as per requirement of the global market.
4. There are ten foreign banks active in Bangladesh, but no Japanese bank yet. So there are
huge prospect for Japanese bank to open their branch in Bangladesh.
22. 3.1. Background Profile of MTB
The Mutual Trust Bank was incorporated as a public limited company on September 29, 1999
under the Companies Act 1994. The Bank started its commercial operation on October 05, 1999
with an authorized capital of BDT 200 Million divided into 2,000,000 ordinary shares of BDT 100
each(Mutualtrustbank.com, 2014).
The Company was also issued Certificate for Commencement of Business on the same day and
was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act
1991 and started its banking operation on October 24, 1999. The bank conducts all types of
commercial banking activities including foreign exchange business and other financial services.
During the first two years of operations, the bank's main focus was on the delivery of personalized
customer services and expansion of its clientele base.
As envisaged in the Memorandum of Association and as licensed by Bangladesh Bank under the
provisions of the Banking Companies Act 1991, the Company started its banking operation and
entitled to carry out the following types of banking business:
1. All types of commercial banking activities including Money Market operations.
2. Investment in Merchant Banking activities.
3. Investment in Company activities.
4. Financiers, Promoters, Capitalists etc.
5. Financial Intermediary Services.
6. Any related Financial Services.
The Company (Bank) operates financial activities through its Head Office situated at Dhaka
and 112 branches. The Bank carries out international business through a Global Network of
Foreign Correspondent Banks.
23. Memberships of MTB
1. Metropolitan Chamber of Commerce and Industry, Dhaka (MCCI, D)
2. The Institute of Banker’s Bangladesh (IBB)
3. Bangladesh Foreign Exchange Dealers Association (BAFEDA)
4. Bangladesh Institute of Bank Management (BIBM)
5. International Chamber of Commerce Bangladesh Limited (ICCB)
6. Association of Bankers Bangladesh Limited (ABB) 7. Bangladesh Association of
Publicly Listed Companies (BAPLC)
7. American Chamber of Commerce in Bangladesh (AMCHAM)
Aiming at offering commercial banking service to the customers' door around the country, Mutual
Trust Bank Limited establishes 112 branches up-to this year. This organization achieved
customers' confidence immediately after its establishment in domestic and international markets.
Mutual Trust Bank is one of the few banks permitted by the Bangladesh bank in the early 90s; the
other banks permitted earlier were Dutch-Bangla Bank, Al-ArafahIslami Bank, Prime Bank,
Dhaka Bank, Eastern Bank, ONE Bank. These banks are known as the second generation banks
and fortunate to remain immune from the bad loan culture. The emergence of Mutual Trust Bank
Limited at the junction of liberation of global economic activities, after the URUGUAY ROUND
has been an important event in the financial sector of Bangladesh.
Mutual Trust Bank has been licensed by the Government of Bangladesh as a Scheduled Bank in
the private sector in pursuance of the policy of liberalization of banking and financial services and
facilities in Bangladesh. In view of the above, the Bank within a period of 17 years of its operation
achieved a remarkable success and met up capital adequacy requirement of Bangladesh bank.
24. 3.2. Mutual Trust Bank Limited: At a Glance
Name of the Company Mutual Trust Bank Limited
Legal form The Company was incorporated as a Public Limited Company on
September 29, 1999, under the Companies Act 1994, with an
Authorized Share Capital of BDT 1,000,000,000 divided into
10,000,000 ordinary shares of BDT 100 each. At present, the
Authorized Share Capital of the company is BDT 10,000,000,000
divided into 1,000,000,000 ordinary shares of BDT 10 each.
Date of Commencement October 05, 1999.
Registered Office MTB Centre, 26 Gulshan Avenue Plot- 5, Block SE (D),
Gulshan-1, Dhaka-1212.
Telephone 880(2) 882 6966, 882 2429
Telefax 880 (2) 882 4303
SWIFT Code MTBL BD DH
E-mail info@mutualtrustbank.com.bd
Web Page www. mutualtrustbank.com
Auditor M. J. ABEDIN & CO.Chartered Accountants, National Plaza
(3rd Floor), 109 Bir Uttam CR Datta Road, Dhaka 1205
Tax Consultant MalekSiddiquiWali BSRS Bhaban (13th floor) 12 Karwan Bazar
C/a, Dhaka 1215, Bangladesh
Managing Director Mr.AnisA.Khan
Company Secretary Mr.Quamrul Islam Chowdhury
Number of Branches 112
SME center 5
MTB Securities limited 14
25. 3.3. Strategic Objectives
To maintain a discreet credit policy.
To enhance versatility and diversification through the penetration of new market
segments, thereby fulfilling unmet needs.
To ensure inflow of funds at combination of least possible cost.
To improve administrative and organizational structures in order to prepare the platform
for best practices of corporate governance.
To practice stronger IT- driven initiatives that will meet the challenges and requirements
of the bank and its clientele.
To provide extensive career opportunities through competitive pay and a flexible
environment.
To extend financial assistance to the citizenry, living at dispersed locations by expanding
the network of branches.
To enrich the banking sector with improved awareness on Corporate Social Responsibility
3.4. Our Mission
We aspire to be one of the most admired banks in the nation and be recognized as an innovative
and client-focused company, enabled by cutting-edge technology, a dynamic workforce and a
wide array of financial products and services.
3.5. Our Vision
Mutual Trust Bank's vision is based on a philosophy well known as MTB. We envision MTB to
be:
One of the Best Performing Banks in Bangladesh
The Bank of Choice
A Truly World-class Bank
3.6. MTB Slogan
You can bank on us
26. 3.7. Functions of Mutual Trust Bank Limited
a. The main task of the MTBL is to accept deposited from various customers through various
accounts.
b. Provides loans on easy terms and condition.
c. It creates loan deposit.
d. The bank invest it fund into profitable sector
e. It transfers money by Demand Draft (DD), Pay Order(PO) and Telegraphic Transfer etc.
f. The bank is doing the transaction of bill of exchange, Cheque etc. on behalf of the clients.
g. MTBL assists in the Foreign Exchange by issuing Letter of Credit.
h. The bank insures the securities of valuable documents of clients.
i. It brings the increasing power of dimension of transaction.
j. Above all, MTBL helps the businessmen financially by giving discount facility for bill of
exchange and by providing the facility of Letter of Guarantee.
27. 3.9. Hierarchy of Organization
SR. EXECUTIVE VICE
PRESIDENT
EXECUTIVE VICE
PRESIDENT
SENIOR VICE
PRESIDENT
PRESIDENT
VICE PRESIDENT
ASSISTANCE
VICE
PRESIDENT
SENIOR ASSTT.VICE
FIRST ASSTT. VICE
PRESIDENT
JUNIOR ASSTT. VICE
PRESIDENT
SENIOR
OFFICER
OFFICER / TRAINEE
OFFICER
JUNNIOR
OFFICER
ASSISTACE
OFFICER
DRIVER/
ELECTRICIAN
OFFICE ASSTT/
ASSTT ELECRICAN
28. 3.10. Product Profile:
Commercial Banks deals with money & Money’s worth with a view to earn profit. Savings &
deposit are considered as lifeblood of the bank. The more is deposit the greater is the strength of
the bank. The bank offers various products scheme to attract deposits & invest the deposit.
Marketing of banks products & services is the process of gearing the activities of a bank to serve
its customers requirements at a profit. The product offered by the bank is as follows:
3.10.1. DEPOSIT PRODUCTS:
Regular Savings Account
Current Account
Brick By Brick
MTB Double Saver Plan
Fixed Deposit
MTB Education Plan
MTB Millionaire Plan
Monthly Benefit Plan
MTB Inspire
MTB Ruby
MTB Junior
MTB Graduate
MTB Senior
3.10.2 NRB PRODUCTS:
NRB Savings Account
NRB Deposit Pension
NRB Fixed Deposit
3.10.3. Retail Loan Products:
MTB Personal Loan
29. MTB Auto Loan
MTB Home Loan
MTB Home Equity Loan
Doctors Loan
MTB Life Line.
Home Repair Loan.
3.10.4. Card Products:
Credit Card
Debit Card
Travel Card
3.10.5. SME Products:
MTB Bhaggobati
MTB Gunaboti
MTB Krishi
MTB Mousumi
MTB Revolving Loan
MTB Small Business Loan
MTB Diggon
MTB Green Energy Loan
Cash Credit Hypo
SME Cash Credit Hypo
MTB Microfinance
MTB Green Energy Loan
MTB Krishijat
MTB Light Engineering
MTB IT Genius
MTB Youth Line
3.10.6. SME Deposit Products:
MTB Probaho
MTB Buniad
30. 3.11. Service Profile:
Consumer Banking
Corporate Banking
Commercial Banking
Lease Finance Facility
Consumer Credit Facility
Locker Facility
Collection of cheque, bills, dividends
Foreign Exchange Dealings
3.12. Company’s Competitive Status:
Highly trained Officer & Stuff
High Customer Loyalty
Good Works Environment
Quick Delivery Service
Highly Customer Satisfaction
3.13. Last Four Year position MTB
Financial Statement(Figure in Millions)
No. Particular 2012 2013 2014 2015
1 Authorized Capital 10000 10000 10000 10000
2 Paid Up Capital 2543 2798 3078 3693
3 Shareholder Equity 4834 5449 6770 8929
4 Total Capital 6981 8137 8712 12413
5 Total Assets 93162 101464 116301 146073
6 Deposits 75140 84373 96065 118405
7 Total Loan & Advance 56511 59548 77141 97589
8 Total Investment 23251 25823 20768 26210
9 Export 25455 32479 36154 45940
31. 10 Import 39427 44273 51593 63988
11 Total Liabilities 17676 23896 30802 35029
12 Operating Income 3507 4619 5690 6580
13 Operating Expenditure 2175 2593 3087 3769
14 Profit Before Tax 1332 2026 2603 2811
15 Profit After Tax 327 573 962 1366
16 Total Provision Maintained 1828 2297 2388 2835
17 Earning Assets 78807 85324 98026 126017
18 Non Interest Earning Assets 14356 16140 18275 98026
3.14. Branch Overview
Bank Name Mutual Trust Bank Limited
Branch Name Alankar Mour Branch
Address DT Road, Abdul Ali Hat, Alankar Mour, North Phartali, Chittagong
Telephone 0312772617, 2772619, 2772620
SWIFT Code MTBBDDH
Routing Number 145150149
District Chittagong
Ratio Analysis
No Items 2012 2013 2014 2015
1 EPS 1.17 1.86 2.60 3.70
2 Net Asset Value Per Share 19.01 19.48 22.00 24.18
3 Dividend(Stock) 10% 10% 20% 20%
4 ROE 6.08% 11.15% 15.74% 17.40%
5 ROA 0.39% 0.59% 0.88% 1.04%
6 Classified Loans as a % of total
Loans & Advances
3.69% 3.62% 2.67% 2.08%
7 Loan-Deposit Ratio 75.21% 70.58% 80.30% 82.42%
8 Capital- Risk Weighted Assets
Ratio
10.71% 11.57% 10.77% 12.02%
9 Market Value Per Share 21.90 16.30 19.80 19.50
10 Price-Earnings Ratio 18.74 7.96 7.60 5.27
33. 4.1 Credit Management
The word credit comes from the Latin word “Credo” meaning “I believe”. It is a lender’s trust
in a person’s or firms or company’s ability or potential ability and intention to repay. Credit is a
contractual agreement, in which a borrower receives something of value now, with the agreement
to repay the lender at some date in the future. One of the basic functions of the bank is deposit
extraction and credit extension. Managing credit operations is the crying need for any bank. The
objective of the credit management is to maximize the performing asset and the minimization of
the non-performing asset as well as ensuring the optimal point of loans and advances and their
efficient management. Credit management is a dynamic field where a certain standard of long-
range planning is needed to allocate the fund in diverse field and to minimize the risk and
maximizing the return on the invested fund. Continuous supervision, monitoring and follow-up
are highly required for ensuring the timely repayment and minimizing the default. Actually the
credit portfolio is not only constituted the bank’s asset structure but also a vital factor of the bank’s
success. The overall success in credit management depends on the banks credit policy, portfolio
of credit, monitoring, supervision and follow-up of the loan and advance. Therefore, while
analyzing the credit management of MTBL, it is required to analyze its credit policy, credit
procedure and quality of credit portfolio. Strong and effective credit management is essential to
ensure the financial health for a bank. Credit management involves credit planning, credit
policies, credit procedures, credit administration, and credit monitoring & credit recovery. Why
the bank provides Loan to the borrowers –
a) To earn interest from the borrowers and give the depositors interest back
b) To accelerate economic development by providing finance to different industrial as well as
agricultural institutions
c) To create employment by providing industrial loans
d) To pay the employees as well as meeting the interest groups profit
34. Credit is a continuous process. Recovery of one credit gives rise to another credit. In this process
of revolving of funds, bank earns income in the form of interest. A bank can invest its fund in
many ways. Banks provide loans and advances to traders, businessmen, and industrialists.
Moreover nature of credit may differ in terms of security requirement, disbursement provision,
terms and conditions etc. This section has been analyzed in this report in the following manner-
1. Types of Loan Provided By the Branch
2. Selection of the borrower
3. Process of the loan
4. Recovery System
5. Regulation
4.2. Factors Considered for Credit
Time
Operating Expense
Risk
Interest Rate
Legal Considerations
Finance Charge
Inflation
4.3 Significance of Credit
Business cycle can run well only by the help of lending system
It helps to create employment opportunities
Credit plays a vital role in national economy in the following ways
It provides working capital for industrialization
Credit controls almost all kinds of production activities of the country
It brings social equity
Cash generation occurs for its successful performance
Economic stabilization
Raise standard of living
35. 4.4. Importance of bank credit
Credit is an important determinant of money creation and hence of production, consumption and
national income. Credit influenced by quantity of money, level of economic activity, imports and
net foreign assets. It influences imports and capital movements and hence outcome of balance of
payments. Some other importance issues of bank credit are as follows:
Credit is influences behavior of economic sector industry, agriculture and behavior
economic agents.
Credit provides vital linkages among government sector, private sector, financial sector
and foreign sector.
Credit is of vital importance that the bank takes good decisions in awarding of loans.
4.5. Credit Policy of MTB
One of the most important ways, a bank can make sure that its loans meet organizational and
regulatory standards and they are profitable. It is important to establish a loan policy. Such a
policy gives loan management a specific guideline in making individual loans decisions and in
shaping the bank’s overall loan portfolio. In Mutual Trust Bank Limited there is perhaps a credit
policy but there is no credit written policy.
4.6. Types of Credit Provided by MTB
4.6.1. Classification on the basis of time
On the basis of elements of time, bank credit classified as:
Continuous Loan
The loan accounts in which transactions may be made within certain limit and have an
expiry date for full adjustment will be treated as continuous loan. Example- Cash Credit,
Overdraft, etc.
36. Demand Loan
The loans that become repayable on demand by the bank will be treated as Demand Loan.
If any contingent or any other liabilities are turned to forced loan those too will be treated
as demand loan. Example- Forced Loan against Imported Merchandise, Payment against
Document, Foreign Bill Purchased, Inland Bill Purchased.
Term loan
These are the advances made by the bank with a fixed repayment schedule. Terms loans
mainly include "Consumer credit scheme", "Lease finance"," Hire purchase", and "Staff
loan". The term loans are defined as follows:
Short term loan: Up to 12 months.
Medium term loan: More than 12 months & up to 36 months
Long term loan: More than 36 months.
Table: Classification on characteristics of financing of Mutual Trust Bank Limited
Funded Non-funded
Overdraft Letter of Credit
Loan Bank Guarantee
Consumer Credit ---
LTR ---
PAD ---
Cash Credit (Pledge & Hypo) ---
Staff Loan ---
Term Loan ---
4.6.2 Application Based Categories of Loan
Based on the purpose of the loan, loans are classified as follows:
Corporate Loan
37. Any loan exceeding 1, 00, 00,000 BDT and issued for business and trade purposes is defined as
corporate loan. Such loans mainly serve the purpose of initials for the establishment of industry
or large scale factory.
SME (Small & Medium Enterprise) Loans
This type of loan is disbursed for business purposes but the amount loaned does not exceed 1, 00,
00,000 BDT. The amount loaned here serves the purpose of potential (partial) working capital
for small and medium business ventures.
Retail Loan
Retail loans are given for personal usage rather than for business purposes. It includes auto loan,
personal loan, vacation loan, and home loan
MTB Personal Loan:
MTB Personal Loan is simple, convenient and quick.
Features:
a. Loan amounts from Tk. 50,000 to Tk. 10,00,000
b. Flexible repayment option of 12 – 60 months
c. No hidden charges
d. Competitive interest rate
e. Easy documentation and quick processing
f. Option for early settlement
Eligibility:
a. Age minimum 21 and maximum 60 years at loan maturity.
Experience:
a. Salaried person: 1 year with 6 months permanent employment status
b. Self-employed: 1 year of practice in the profession
c. Businessperson: 2 years of involvement in the same nature of business
38. Minimum monthly income:
a. Salaried executive Tk. 15,000
b. Self-employed Tk. 30,000
c. Businessperson/Land lord/Land lady Tk. 40,000
MTB Auto Loan
MTB offers lucrative interest rates that would pleasantly surprise the customer. MTB Auto Loans
are built for utmost speed and competence. MTB Auto Loan is available for financing both new
and reconditioned cars.
Features:
a. Loan amounts from Tk. 3,00,000 to Tk. 20,00,000
b. Flexible repayment of 12 – 60 months
c. No hidden charges
d. Competitive interest rate
e. Easy documentation and quick processing
f. Option for early settlement
Eligibility:
a. Age: minimum 21 and maximum 60 years at the end of loan maturity
Experience:
b. Salaried executive total – 2 years
c. Business person/self-employed – 2 year
d. Monthly income: Minimum Tk. 30,000
MTB Home Loan
39. Planning to own a home is one of life’s most rewarding challenges. Whether it is purchasing a
new house or a new apartment, MTB has a wide range of home loan options that can be customized
to your specific need. An experienced, dedicated team of experts and a complete loan package is
in place, to meet all your housing finance needs. MTB Home Loan helps the client to fulfill their
dreams.
Features:
a. Loan for residential apartment/house purchase
b. Loan amounts from BDT 5,00,000 to BDT 1,00,00,000
c. Loan tenor from 3 to 25 years
d. Loan amount up to 80% of the property value
e. Aggregation of co-applicant’s income
f. Competitive interest rates
g. Quick and simple processing and approval time
h. Loan for apartment under construction
i. Partial or early settlement options available
Eligibility:
a. Any financially able person
b. Age: minimum 21 and maximum 65 years at loan maturity
c. For 100% cash covered loan: Age- minimum 18 and maximum 70 years at loan
maturity
Minimum Income Range:
a. Salaried person Tk. 25,000
b. Self-employed Tk. 30,000
c. Businessperson/Land lord/Land lady Tk. 40,000
40. Experience
a. Salaried person : 3 years
b. Self-employed : 3 years
c. Businessperson : 3 years
Loan Takeover Plan
An exclusive offer for other bank’s credit worthy customers who can transfer their Home
Loan outstanding to MTB with both preferential interest rate and waiver of processing fees.
Eligibility:
a. Minimum12monthsloanEMIrepaymenthistorywithexistingbank
b. Property location and other eligibility criteria of general loan are applicable
Benefits of Takeover Plan:
a. 1% reduced rate from regular interest rate
b. Additional loan amount facility over takeover amount
c. No processing fee for takeover loan amount
d. No processing fee for additional loan amount
Required documents:
Loan application
Applicant’s National ID/Driving License/Passport copy
Photographs of applicants (studio photo)
Salary certificate for salaried person
Trade license for businessperson
Personal and business account statement for last one year
Applicant’s TIN certificate
41. Copies of all existing loans‟ sanction letter and repayment history for last one year
Rental deed for rental income and ownership deed of rented property
Apartment allotment letter/Deed of agreement/property ownership deed
Other all property related documents copy.
4.7. Different Securities for Different Types of Advances
Securities offered to the bank by the borrowers are of different types. Each security has its own
suitability. Some of the examples of the securities obtained by the banks while allowing advance
are shown below against the types of advances:
Table: Different Securities for Different Advances
Types of Advances Securities
House building loan Primary securities: mortgage of the land or any property
Transport loan Primary securities: joint registration and comprehensive
insurance policy. Two valuable guarantors. Collateral
securities: mortgage of land or any property. Any type
financial obligation.
Auto loan Primary securities: joint registration and comprehensive
insurance policy. Two valuable guarantors and post-dated
cheques
Any purpose loan Primary securities: two valuable guarantors and post-dated
cheques.
42. Payments against documents(PAD) Pledge or hypothecation of stock-in trade, goods, produce and
merchandise, machineries, land or building on which
machineries are installed.
Loan against imported merchandise Pledge of imported merchandise
Loan against trust receipt Trust receipt in lieu of import document
Local bills purchased Bill itself
Foreign bill purchased Shipping documents for exports
Overdraft Primary securities: hypothecation of book depth
Collateral securities: mortgage of landed property and IPA.
Secured overdraft Primary securities: Lien on any types of financial obligation
Cash credit Primary securities: Hypothecation of stock of goods in trade
duly insured produce merchandise. Collateral securities:
Mortgage of land and building, any financial obligation
4.8. Methods of Charging Securities
The following modes of charging securities are applied in the Mutual Trust Bank Limited
Lien
A lien is right of banker to hold the debtor’s property until the debt is discharged. Bank generally
retains the assets in his own custody but sometimes these goods are in the hands of third party with
lien marked gives banker the right to retain the property not the right to sell. Permission from the
appropriate court is necessary.
Pledge
Pledge is also like lien but here bank enjoys more right. Bank can sell the property without the
intervention of any court, in case of default on loan, But for such selling proper notice must be
given to the debtor. To create pledge, physical transfer of goods to the bank is must.
43. Hypothecation
In this charge creation method physically the goods remained in the hand of debtor. But
documents of title of goods are handed over to the banker. Since the goods are in the hand of the
borrower, bank inspects the goods regularly to judge its quality and quantity for the maximum
safety of loan.
Mortgage
Mortgage is transfer of interest in specific immovable property. Mortgage is created on the
immovable property like land, building, plant etc. Another method called equitable mortgage is
also used in bank for creation of charge. Here mere deposit of title to goods is sufficient for
creation of charge.
Trust Receipt
Generally goods imported or bought by bank's financial assistance are held by bank as security.
Bank may release this lien / pledge these goods against trust receipt. This means that the
borrower holds goods in trust of the bank; trust receipt arrangement is needed when the borrower
is going to sell these goods or process it further but borrower has no sufficient fund to pay off the
bank loan
Advance against Work-Order
Advances can be made to a client to perform work order. The following points are to be taken
into consideration. The client’s management capability, equity strength, nature of scheduled work
and feasibility study should be judiciously made to arrive at logical decision.
Advance against Approved Shares
Credit facilities to extend against shares will be called “Investment Scheme against Shares”.
Advance may be allowed against shares of companies listed with the Stock Exchange Ltd.
Advance against Fixed Deposit Receipts
44. Advance against Fixed Deposit Receipt will be subject to credit Restrictions imposed from time
to time by Head Office / Bangladesh Bank. Mutual Trust Bank Limited usually sanctions credit
limit up to 80% of the FDR value. Scrutinize the Fixed Deposit Receipts with regard to the
following points
1) The Fixed Deposit Receipt is not in the name of minor.
2) b) It is discharged by the depositor on revenue stamp of adequate value& his signature is
verified.
3) c) Creation of liability on Fixed Deposit issued in joint names by any one of the depositors
is regular
4) d) If the Deposit Receipt is offered as a security for allowing advances, a letter of lien shall
be obtained from the depositors, on the appropriate form.
5) e) If the Deposit Receipt has been issued by the branch-allowing advance, lien against that
specific Deposit Receipt to be marked in the fixed Deposit Register of the branch.
4.9. The 9C’s of Bad and Good Loan in Credit Management
The Branch manager of MTB try to judge the possible client based on some criteria. These criteria
are called the C‟s of good and bad loans. These C‟s are described below:
4.9.1. Character
The outcome of analyzing the character is to have overall idea about the integrity, experience, and
business sense of the borrower. Two variables; Interaction/interview, and Market Research are
used to analyze the character of the borrower.
4.9.2. Capital
For identifying the capital invested in the business can be disclosed using the following indicators:
Financial Statements
45. Receivable, Payable, statements to practically assess the business positions. Net worth
through financial statements or from declaration of Assets & Liability statement.
4.9.3. Capacity (Competence)
Capability of the borrower in running the business is highly emphasized in the time of selecting a
good borrower. As the management of the business is the sole authority to run the business that
is use the fund efficiently, effectively and profitably. The indicators help to identify the capacity
of the borrower.
4.9.4. Collateral
Make sure that there is a “second way out” of a credit, but do not allow that to drive the credit
decision.
4.9.5. Cash Flow
Cash flow is the vital factor that is used to identify whether the borrower will have enough cash to
repay the loan or advance .Cash keeps the liquidity to ensure repayment. The relationship
manager tries to identify the annual cash flow from the submitted statements.
4.9.6. Conditions
Understanding the business and economic conditions can and will change after the loan is made.
4.9.7. Complacency
Do not rely on past history to continue. Stay alert to what can go wrong in any loan.
4.9.8. Communication
Share credit objectives and credit decision making both vertically and laterally within the bank.
4.9.9. Credit Query
The loans and advance department gets a form filled up by the party seeking a lot of information.
4.10. Different Categories of Risks Associated with CM
Business risk:
It refers to the risk that the business falls to generate sufficient cash flow to repay the loan. Business
risk is subdivided into two categories
46. Industry risk:
Due to some external reasons a business may fail and the risk, which arrives from external
reasons of the business, is called industry risk. It is subdivide into supplies risk and sales
risk.
a. Supplies risk:
It indicates that the business suffers from external disruption to the supply of imputes.
Components of supplies risk are as raw material, Labor, power, machinery, equipment,
factory premises etc
b. Sales risk:
This refers to the risk that the business suffers from external disruption of sales. Sales
may be disrupted by changes to market size, increasing in competition, and change in
the regulation or due to the loss of single large customer.
Company Risk:
This refers to the risk that the company fails for internal reasons. Company risk is subdivided into
Company Position Risk and Management Risk.
Company Position Risk:
Within an industry each and every company holds a position. This position is very
competitive. Due to the weakness in the company's position in the industry, a company is
the risk for failure. That means, company position risk is the risk of failure due to weakness
in the company’s position in the industry. It is subdivided into performance risk and
resilience risk.
Management Risk:
47. The management risk refers to the risk that the company fails due to management not
exploiting effectively the company’s position. Management risk is subdivided into
Management Competence Risk and Integrity Risk.
A. Management Competence Risk:
This refers to the risk that falls because the management is incompetent. The
competence of management depends upon their ability to manage the company's
business efficiently and effectively. Management team work is determined by
analyzing management structure and its strength and weakness.
B. Management Integrity Risk:
This refers to the risk that the company fails to repay the loan amount due to lack
of management integrity. Management integrity is a combination of honesty and
dependability
4.11. Credit Risk Grading (CRG) System
Credit risk grading is an important tool for credit risk management as it helps the Banks & financial
institutions to understand various dimensions of risk involved in different credit transactions. The
credit risk grading system is vital to take decisions both at the pre-sanction stage as well as post-
sanction stage .At the pre-sanction stage, credit grading helps the sanctioning authority to decide
whether to lend or not to lend, what should be the loan price, what should be the extent of exposure,
what should be the appropriate credit facility, what are the various facilities, what are the various
risk mitigation tools to put a cap on the risk level. At the post-sanction stage, the bank can decide
about the depth of the review or renewal, frequency of review, periodicity of the grading, and other
precautions to be taken. Usually there includes six steps for CRG. These are:
1. Identify all the Principal Risk Components
48. 2. Allocate weights to Principal Risk Components
3. Identify the Key Parameters
4. Assign weight to each of the key parameters
5. Input data to arrive at the score on the key parameters.
6. Arrive at the Credit Risk Grading based on total score obtained
1) Identify all the principal risk components
At the first step all the principal risk such as financial risk, business risk, management risk, security
risk and relationship risk are identified. These principal risks cover all possible uncertainty that
may occur.
2) Allocate weight to principal risk components
In this step, weight is distributed to the risk components. Risk factors have to be evaluated and
weighted on the basis of updated & reliable data and complete objectivity.
Table: Weight to Principal Components
Financial risk 50%
Business risk 18%
Management risk 12%
Security risk 10%
Relationship risk 10%
3) Identifying the key parameters of principal risk
In this step, key parameters of principal risk are identified. The parameters are shown on table
below:
Risk components Key parameters
Financial risk Leverage, liquidity, profitability,& coverage
ratio
Business risk Size & age of business, business outlook,
industry growth, competition & barriers to
business
Management risk Experience, Succession & team work
Security risk Security coverage, collateral coverage & support
49. Relationship risk Account conduct, utilization of limit, compliance
of covenants & personal deposit
4) Assigning weight to key parameters
After identifying key parameters, weight is given to each parameter of principal risk components.
In this case, high weight is given to the risky parameters.
5) Input data to arrive at score
Finally, data is put on Excel based CRG matrix for getting the score.
Table: Arriving at the Credit Risk Grading
Number Grading Short Score
1 Superior SUP Fully cash secured, secured by govt.
guarantee/international bank guarantee
2 Good GD 85+
3 Acceptable ACCP 75-84
4 Marginal/Watch
list
MG/WL 65-74
5 Special Mention SM 55-64
6 Substandard SS 45-54
7 Doubtful DF 35-44
8 Bad/Loss BL <35
6) Arrive at the Credit Risk Grading based on total score obtained:
At last bank select a grade for the borrower.
CRG System Review
CRG system should be reviewed by the respective loan officer regularly. Frequencies of review
of CRG are mentioned below:
Risk grading Frequency (at least)
Superior Annually
Good Annually
Acceptable Annually
50. Marginal/Watch list Half yearly
Special Mention Quarterly
Substandard Quarterly
Doubtful Quarterly
Bad/Loss Quarterly
4.12. General procedure of sanctioning loan
The following procedure is applicable for giving advance to the customer. These are:
a. Party’s application
b. Filling form-A
c. Collecting CIB report from Bangladesh Bank
d. Processing loan proposal
e. Project appraisal
f. Head office approval
g. Sanction letter
h. Documentation
i. Disbursement
j. Credit Monitoring Process
k. Credit Recovery
A. Party’s application
At first borrower had to submit an application to the respective branch for loan, where he/she
has to clearly specify the reason for loan. After receiving the application form the borrower
Bank officer verifies all the information carefully. He also checks the account maintains by
the borrower with the Bank. If the official becomes satisfied then he gives form-A
(prescribed application form of Bank) to the prospective borrower.
B. Filling Form -A
51. After satisfying with party’s application the applicant need to fill Form-A. It is the prescribed
form provides by the respective branch that contains information of the borrower.
C. Collecting CIB Report from Bangladesh Bank
After receiving the application for advance, Mutual Trust Bank sends a letter to Bangladesh
Bank for obtaining a report from there. This report is called CIB (Credit Information Bureau)
report.
D. Processing loan Proposal
After receiving CIB report from Bangladesh Bank, then respective branch prepare an
Investment proposal, which contains terms and conditions of Investment for approval of Head
Office. Documents those are necessary for sending Investment proposal are:
Necessary Documents
While advancing money, banks create a lot of documents, which are required to be signed by
the borrower’s before the disbursement of the loan. Of them some are technically called
charge documents. Necessary steps and documents:
1. Loan application form duly signed by the customer.
2. Acceptance of the term and conditions of sanction advice.
3. Trade license.
4. In Case Of Partnership Firm, copy of registered partnership deed duly certified as true
copy or a partnership deed on non-judicial stamp of taka-150 denomination duly
notarized.
5. Demand promissory notes. 6. Letter of hypothecation of stocks and goods.
6. Letter of hypothecation of books debts and receivable.
7. Letter of hypothecation of plant and machinery.
52. 8. Personal letter of guarantee.
9. Required Doc’s for Retail (Individual) Loan
10. Required Doc’s for Retail (Individual) Loan
Photograph- 2 Copies
Passport/National ID/Driving License
Visiting card/company ID
Tin
Trade license (For Businessman)
LOI (For service holder)
Utility Bill (electricity/WASA/Gas)
Bank statement- last 6 months
Quotation (For Auto or HHD)
Partnership Deed (for partnership firm)
Company memorandum
Rental/Lease/Title Deed
Certificate of professional degree
Guarantor
Spouse- photo with signature, Attested by applicant
Eligible photo with signature, Attested by the applicant, Visiting card, TIN
Sanction letter with Related Bank Statement (If Enjoying Any Loan).
11. Required Doc’s for SME
Total stock
53. Total sale for 1 year
Guarantor
Photograph
Visiting card
TIN
Trade license
E. Project Appraisal
It is the pre-investment analysis. Project appraisal in the Banking sector is important for the
following reasons:
To achieve organizational goals,
To recommend if the project is not designed properly.
To justify the soundness of an investment
To ensure repayment of Bank finance
F. Head Office Approval
When Head office receive appraisal from the branch then, Head Office again appraises the
project. If it seems to be a viable one, the HO sends it to the Board of Directors for the approval
of the Investment. The Board of Directors (BOD) considers the proposal and takes decision
whether to approve the Investment or not. If the BOD approves the investment, the HO sends
the approval to the concerned branch.
G. Sanction Letter
When a Branch Manager writes a letter to accepting all terms and conditions of loan, it is called
loan sanction. The conditions which are included in the loan sanctions these are given bellow:
Limit.
Primary Securities.
54. Collateral Securities.
The Rate of Interest
Expiry date.
Repayment.
Documentation.
Others Condition.
H. Documentation
If the borrower accepts the sanction letter, the Documentation starts. The most common
documents used by the Mutual Trust Bank for sanctioning different kinds of Investment are:
Joint Promissory Note,
Letter of Arrangement,
Letter of Disbursement,
Letter of Installment,
Letter of Continuity,
Trust Receipt,
Counter Guarantee,
Stock Report,
Letter of Lien,
Status Report
Letter of Hypothecation,
Letter of Guarantee
Documents Relating to Mortgage.
I. Disbursement
55. After sanction and completion of all formalities the respective officer disburses the loan. The
officer writes cheque and provides it to the borrower. For this borrower has to open an account
through which he/she can withdraw the money.
Strategies for Recovery: Recovery of loan can be made in the following three methods:
Persuasive
Voluntarily
Legally
J. Credit Monitoring
To minimized credit losses, monitoring procedures and systems are in place that provides an
early indication of the deteriorating financial health of borrower. At a minimum, systems
should be in place to report the following exceptions to relevant executives in CRM and RM
team.
Past due principal or inters payments, past due trade bills, account excesses, and
breach of loan covenants:
Loan terms and conditions are monitored, financial statements are received on a
regular basis, and any covenant breaches or exceptions are referred to HO Credit for
timely follow-up.
Timely corrective action is taken to address findings of any internal, external or
regulator inspection/audit.
All borrower relationships/loan facilities are reviewed and approved through the
submission of a Credit Application at least annually
K. Credit Recovery:
The Recovery Unit of Branch should directly manage accounts with sustained deterioration (a
Risk Rating of Sub Standard or worse).The RU’s primary functions are:
56. Determine Account Action Plan/Recovery Strategy
Pursue all options to maximize recovery, including placing customers into receivership
or liquidation as appropriate.
Ensure adequate and timely loan loss provisions are made base on actual and expected
losses.
4.13. Status of Loans
4.13.1. Unclassified
These are the loans with which the bank satisfied about repayment. No doubt exists up till now
about their recovery.
4.13.2. Classified
These are the loans which the bank finds overdue after the due date. The bank applies its
predefined policy and procedures, after a loan becomes classified.
Special Mention Account
When a loan installment is first missed by the borrower, the loan account is classified as a
Special Mention Account (SMA). The tenure of SMA varies with the category of loans.
Sub-Standard
If a loan is not repaid or reschedule within the SMA period, it becomes sub-standard loan.
From this stage the loan is treated as defaulted. Interest is treated the same way as in SMA.
Doubtful
If a loan is not repaid or reschedule within the sub-standard period, it becomes a doubtful
loan Interest will be treated as before in this stage.
57. Bad & Loss
If a loan is not repaid or reschedule within the doubtful stage, it is termed as bad & loss.
Serious doubts exist as to the recovery of such loans
59. 5.1. Introduction
This chapter contains the evaluation of last five years performance of the bank. It represents the
performance on loan & advance, collection of loan & advance, classified loan, loans & deposit
ratio, profitability, growth of profit. The following are as follows:
5.2. Loan and Advances
Year Loans and Advances(In millions)
2012 410
2013 329
2014 382
2015 722
2016 1191
Table: Loan and Advances of MTBL Alankar Mour Branch during the period from 2012 to
2016
Interpret: Year wise total loans and advances of MTBL is also fluctuate year by year. In 2012
the total loan was 410 million. But it was decreased to 329 million in 2013. Bank prudent and
continuous credit operation gradually increased from 2014 to 2016.
5.3. Collection of Loan & Advance
Year Amount(In millions)
410
329
382
722
1191
0
200
400
600
800
1000
1200
1400
2012 2013 2014 2015 2016
Loan and Advance
60. 2012 246
2013 131
2014 152
2015 505
2016 953
Table: Collection of Loan and Advances of MTBL Alankar Mour Branch during the period from 2012 to 2016
Interpret: Above table and graph shows that the collection of loan and advance of Mutual Trust
Bank, Alankar Mour Branch are fluctuate year by year from 2012 to 2016. In 2012 the collection
of loans loan was 246 million. But it was decreased to 131 million in 2013.
5.4. Credit to deposit Ratio Analysis
Credit deposit ratio measures the portion of deposit used for credit. The more the ratio the more
the bank is capable to uses its deposit as credit.
Credit to deposit ratio= Total Credit/ Total Deposit
Year Total Credit Total Deposit Total Credit/ Total Deposit
2012 410 455 90.10%
0
100
200
300
400
500
600
700
800
900
1000
2012
2013
2014
2015
2016
246
131 153
505
953
Colleection of loan & advance
61. 2013 329 436 75.45%
2014 382 507 75.34%
2015 722 853 84.64%
2016 1191 1256 94.82%
Table: Loan and Deposit Ratio of MTBL Alankar Mour Branch during the period from 2012 to 2016
Interpret: From the figure it can be said that the collection of deposit in fluctuate year by year
that form into loan & advances increasing year by year subsequently. Firstly there high loans and
deposit ratio but next two years falls there loans & deposit ratio. If we noticed that from year
2015 to 2016 credit deposit ratio has increased significantly which is positive sign that the bank is
successfully utilizing its deposit collected from the people by the lowest interest rate into in the
form of loan and advances which is main source of Bank’s income.
5.5. Classified Loan
Year Amount(In millions)
2012 0.93
2013 2.59
2014 2.65
2015 2.93
2016 3.21
Table: Classified Loan of MTBL Alankar Mour Branch during the period from 2012 to 2016
0.00
0.10
0.20
0.30
0.40
0.50
0.60
0.70
0.80
0.90
1.00
2012 2013 2014 2015 2016
Loans & Deposit Ratio
Loans & Deposit Ratio
90.10
75.45 75.34
84.64
94.82
62. Interpret: Above table and graph shows that the classified loan and advance of Mutual Trust
Bank, Alankar Mour Branch are increasing year by year from 2012 to 2016.
5.6. Net Profit
Year Amount(In millions)
2012 13.39
2013 28.38
2014 25.89
2015 33.71
2016 83.61
Table: Net Profit of MTBL Alankar Mour Branch during the period from 2012 to 2016
0
0.5
1
1.5
2
2.5
3
3.5
2012 2013 2014 2015 2016
0.93
2.59 2.65
2.93
3.21
Classified Loan
63. Interpret: Above table and graph shows that the Net Profit of Mutual Trust Bank, Alankar Mour
Branch is fluctuate year by year from 2012 to 2016. Net Profit was highest in 2016 and the figure
was 83.61 million taka. However, in 2012 it was lowest and the figure was 13.39 million taka.
5.7. Growth of Profit
Year Growth of Profit
2012 40.48%
2013 112%
2014 91.22%
2015 30.39%
2016 148%
0
20
40
60
80
100
2012 2013 2014 2015 2016
Net Profit
Net Profit
28.38
13.39
25.89
33.71
83.61
64. Interpret: From the graph shows that the Growth of Net Profit of Mutual Trust Bank, Alankar
Mour Branch is fluctuate year by year from 2012 to 2016. In 2012 growth of net profit was 40.48%
and in 2013 it in increased at 112%. But in 2014 Mutual Trust Bank, Alankar Mour Branch
couldn’t perform well as its growth of net profit was decreased at 8.80% compared to year 2013
at 112%. In 2015 to 2016 the growth of net profit are gradually increased but maximum profit
growth in 2016 at 148%.
40.48%
112%
91.22%
30.39%
148%
0.00%
20.00%
40.00%
60.00%
80.00%
100.00%
120.00%
140.00%
160.00%
2012 2013 2014 2015 2016
Growth of Net Profit
Growth of Net Profit
66. 6.1. Summary of Findings
While working at Mutual Trust Bank Alakar Mour Branch, I have attained to the kind of
experience. After the collecting and analyzing of data I have got some findings. Those findings
are completely from my personal point of view.
1. The Loans & Advances of Mutual Trust Bank Alakar Mour Branch was fluctuate year
by year, but it was decreased to 329 million in 2013. The highest amount was tk. 1191
million and the lowest amount tk. 329 million in the year 2016 and 2013 respectively.
2. The collection of loan and advance of Mutual Trust Bank, Alankar Mour Branch are
fluctuating year by year from 2012 to 2016. In 2012 the collection of loans loan was 246
million. But it was decreased to 131 million in 2013.
3. The collection of deposit was fluctuate year by year that form into loan & advances
increasing year by year subsequently. Firstly there high loans and deposit ratio but next
two years falls there loans & deposit ratio. If we noticed that from year 2015 to 2016 credit
deposit ratio has increased.
4. The Classified loan and advance of Mutual Trust Bank, Alankar Mour Branch are
increasing year by year from 2012 to 2016.
5. The Net Profit of Mutual Trust Bank, Alankar Mour Branch is fluctuating year by year
from 2012 to 2016. Net Profit was highest in 2016 and the amount was 83.61 million
taka. However, in 2012 it was lowest and the amount was 13.39 million taka.
6. The Growth of Net Profit of Mutual Trust Bank, Alankar Mour Branch is fluctuating year
by year from 2012 to 2016. In 2012 growth of net profit was 40.48% and in 2013 it in
increased at 112%. But in 2014 Mutual Trust Bank, Alankar Mour Branch couldn’t
perform well as its growth of net profit was decreased at 8.80% compared to year 2013 at
112%. In 2015 to 2016 the growth of net profit are gradually increased but maximum
profit growth in 2016 at 148%.
7. Total Deposit is increasing which represent the positive sign for the bank as deposits are
increasing than the bank can use more proportion of deposit for loans and advances.
67. 8. The most popular loan product is corporate loan.
9. A systematic loan approval process is maintained.
10. Sometimes bank prepares CRG score based or unaudited balance sheet.
6.2. Recommendation
Recommendations of these report has been made on the basis of the research findings of the credit
facilities of Mutual Trust Bank Limited, Alankar Mour Branch. It is very difficult to recommend
about this topic because of research restrictions and unavailability of data. Despite these problems
there is something that the credit department of Mutual Trust Bank should look at
1. Bank should prepare the CRG score sheet based on audited balance sheet. Because it
shows appropriate position of the firm. So it reduces the credit risk.
2. Effective decision should taken by the trust for the more deposit because the more deposit,
the more loan, the more profit & the more investment.
3. Effective and efficient initiative is necessary to recover the default loans.
4. The loan documentation and verification should be done fairly and properly.
5. They should diversify their Loan products.
6. The credit department, strict supervision is necessary to avoid loan defaulters. The bank
officials should do regular visit to the projects.
7. MTB should take initiative for agriculture sectors
8. MTB should attract customer to provide loan at minimum rate compare to other bank.
9. MTB should improve the recovery rate of Loan & Advances.
10. The bank should take proper step to maintain & increase its credit to deposit ratio. It
should increase in order to generate more profit.
68. 6.3. Conclusion
Proper financial system of country can contribute towards the development of the country’s
economy. In our country banks are leading in the financial system. Again private commercial
banks, which are much better than state owned bank, are playing significant as well as imperative
role and the development of our country. Certainly MTB is mobilizing all of its resources on this
same track to achieve maximum possible contribution to the nation
Despite stiff competition among banks operating in Bangladesh both foreign and local, MTB has
achieved satisfactory progress in areas of its operations and earned an impressive operating income
over the previous years. The bank hopes to achieve a satisfactory level of progress in all areas of
its operations including target of profitability
In achieving the aforesaid objectives of the bank, credit operation is of paramount importance as
the greatest share of total revenue of the bank is generated from it, maximum risk is centered in it
and even the very existence of bank depends on prudent management of its credit portfolio.
The writer would like to suggest, a bank requires some special personal traits that not every bank
possesses. Among the most important of these are honesty, reliability, thoroughness and
willingness to always be open to new ideas and new ways of meeting customer needs.
Today is not like yesterday and tomorrow will be different from today. Given the fast changing,
dynamic global economy and the increasing pressure of globalization, liberalization, consolidation
and disintermediation, it is essential that Mutual Trust bank limited has a robust credit risk
management policies and procedures that are sensitive to these changes.
69. References:
Flora Banking Software
MTBL Corporate Intranet
Annual Report on 2012 to 2016
Personal Interview with Credit Department
Statement Supplied by Credit Department
Various information’s supplied by Mutual Trust Bank Alanker Mour Branch, Chittagong
Previous Internship Report
Websites:
o www.mutualtrustbank.com
o www.bb.org.bd
o Other websites
